Customer Potential Segmentation – A Roadside Revelation
The history of mankind is populated with roadside revelations. Moses had one on the road from Midian, Paul had one just outside Damascus and Caesar had his marching the Apian Way. Clearly there is something mystical about the lonesome solitude of journey that drives unfocused thought. According to Yale Computer Scientist and Philosopher David Gelernter, unfocused thought leads to new discovery. I had my own road-side revelation on I-35 just south of Des Moines. And by now many of you are wondering. What does this have to do with sales? Let me explain.
It was a fiery cold winter day during January of 1982. I had just spent the better part of the day outside in the biting cold helping an electrician apply a hundred dollar electric pressure switch. And, even though this guy would never be anything but a small potatoes customer, I enjoyed a warm fuzzy feeling as I pulled out of that ice covered gravel drive-way. But midway home, I stopped at a drive-up phone booth (remember those days before cell phones) to call my office. The warm fuzziness turned to a deep stomach burn when I discovered my top customer had been trying to reach me since 11:30 that morning. I had traded a full day of selling time for a whole bunch of good feelings and a buck’s worth of commissions. Right there, I had my first great epiphany on selling.
Not all customers are created equal
I had been raised to believe in the American mantra – all men are created equal. My parents instilled a belief that everyone should be treated the same whether they were the bank janitor or bank president. As I approached the selling world, this belief spilled into my work philosophy. I would be that great guy who treated the smallest customer with the same level of care and respect as my largest account. It seemed as American as mom’s apple pie and the girl next door. But, this mantra stood in the way of business success.
As a knowledge-based seller, my problem solving skills were an integral part of my package of value. Each and every sale combined my personal expertise along with the products. The total package created customer value. On every sales call, I offered my personal value in return for a potential investment from the customer. When I made a sale, it was a mutually beneficial arrangement. I invested, they invested and we both saw a return.
That day I realized some customers simply couldn’t match my own personal investment. It wasn’t that they decided not to invest. The hard cold truth was – they didn’t have the ability to invest.
The finances of knowledge-based selling
To put my selling into a completely different industry; my time spent with this electrician was similar to an investment banker spending time with a penniless vagrant. Yeah, they might be convinced to investing their total savings to a stock portfolio. But their investment savings equal nothing.
I dwelled on this issue for the next few days. In order to meet my sales goals I had to generate $2 Million in sales per year (remember it was 1982). With this in mind, I discovered that each work day required the generation of $10,000 dollars in sales. And, since my hit rate would never be 100% I probably really needed to touch $30-40,000 in potential every day. Clearly, I couldn’t spend a whole day with someone with a couple thousand to spend for the whole year.
This was probably my first excursion into the field of targeting customers. It was a simple plan. I would sort customers based on their ability to invest in my products – their potential. My working plan would revolve around maximizing my exposure to the people who could afford my services (yes, I think of selling as a service to the customer).
I divided by accounts into 5 segments or categories.
- Unknown potential – Explore and quickly establish their potential
- Opportunity to grow – Emerging companies – Go to where the puck will be
- High Potential – The really big guys, often on everyone’s radar screen.
- Medium Potential – A few of these can make a difference.
- Low Potential – Good people, but they lack the resources to make my investment into a win-win situation
My plan was to review my time each week and migrate my time investment towards the right people.
The rest of the story
It’s been nearly thirty years since I made this little discovery. It’s not rocket science. You would think that everyone would have discovered this by now. Yet, I continue to see sales people who have not actually categorized their accounts. I see good people investing their precious time with the wrong accounts.
Sales people who have precise plans for categorizing their customers and directing efforts move forward. The others – well they are the really nice guys who continue to struggle. They find themselves working long and hard, yet they just never seem to find success.